<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1997 COMMISSION FILE NUMBERS:
BENEDEK BROADCASTING CORPORATION 33-09529
BENEDEK COMMUNICATIONS CORPORATION 33-91412
----------------------
BENEDEK BROADCASTING CORPORATION
AND
BENEDEK COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------
DELAWARE BENEDEK BROADCASTING CORPORATION 13-2982954
DELAWARE BENEDEK COMMUNICATIONS CORPORATION 36-4076007
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
----------------------
SUBSIDIARY GUARANTOR REGISTRANT
BENEDEK LICENSE CORPORATION DELAWARE 36-4081877
(EXACT NAME OF SUBSIDIARY (STATE OF FORMATION) (I.R.S EMPLOYER
GUARANTOR AS SPECIFIED IN ITS IDENTIFICATION NUMBER)
CERTIFICATE OF INCORPORATION)
----------------------
100 PARK AVENUE 61101
ROCKFORD, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 815-987-5350
----------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED:
------------------- -------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) have been subject to such filing
requirements for the past 90 days. Yes X No ___
100% of the voting common stock of Benedek Communications Corporation is
owned by Mr. A. Richard Benedek. 100% of the voting common stock of Benedek
Broadcasting Corporation is owned by Benedek Communications Corporation. None of
the voting common stock of either registrant is held by non-affiliates.
Indicate the number of shares outstanding of each of Benedek Broadcasting
Corporation's classes of common stock as of the latest practicable date: At
August 10, 1997, there were outstanding 148.85 shares of common stock, without
par value.
Indicate the number of shares outstanding of each of Benedek Communications
Corporation's classes of common stock, as of the latest practicable date: At
August 10, 1997, there were outstanding 7,030,000 shares of common stock, $0.01
par value.
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
BENEDEK BROADCASTING CORPORATION AND
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM
NUMBER PAGE
- ------ ----
<S> <C> <C>
PART I - FINANCIAL STATEMENTS
Item 1. FINANCIAL STATEMENTS
Introductory Comments ............................................................................ 1
Benedek Communications Corporation and Benedek Broadcasting Corporation and Subsidiaries
Consolidated Balance Sheets as of December 31, 1996 and June 30, 1997 .......................... 2
Consolidated Statements of Operations for the Three Months Ended
June 30, 1996 and 1997 ....................................................................... 3
Consolidated Statements of Operations for the Six Months Ended
June 30, 1996 and 1997 ....................................................................... 4
Consolidated Statement of Stockholder's Equity (Deficit) for the Six Months Ended
June 30, 1997 ................................................................................ 5
Consolidated Statements of Cash Flows for the Six Months Ended June 30,
1996 and 1997 ................................................................................ 6
Notes to Consolidated Financial Statements ..................................................... 8
Benedek License Corporation
Balance Sheets as of December 31, 1996 and June 30, 1997 ....................................... 16
Statements of Operations for the Three Months and Six Months Ended
June 30, 1996 and 1997 ....................................................................... 17
Statement of Stockholder's Equity for the Six Months Ended June 30, 1997 ....................... 18
Statements of Cash Flows for the Six Months ended June 30, 1996 and 1997 ....................... 19
Notes to Financial Statements .................................................................. 20
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .............................................................. 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................................. 31
Item 6. Exhibits and reports on Form 8-K ................................................................. 31
SIGNATURES ............................................................................................... 33
</TABLE>
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IMPORTANT EXPLANATORY NOTE:
The integrated Form 10-Q is filed, without audit, pursuant to the Securities
Exchange Act of 1934, as amended, for each of Benedek Communications
Corporation and its wholly owned subsidiary, Benedek Broadcasting
Corporation. Unless the context requires otherwise, references to the
"Company" refer to both Benedek Communications Corporation and Benedek
Broadcasting Corporation. Benedek Communications Corporation is a holding
company with minimal separate operations from its operating subsidiary,
Benedek Broadcasting Corporation. Separate financial information has been
provided for each entity and, where appropriate, separate disclosures.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. It is
suggested that these Financial Statements be read in conjunction with the
financial information set forth in the Annual Reports on Form 10-K of each
of Benedek Communications Corporation and Benedek Broadcasting Corporation
for the fiscal year ended December 31, 1996.
-1-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
----------------------------------- -----------------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporation Corporation
--------------- --------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents........................ $ 8,090,583 $ 8,091,683 $ 3,322,763 $ 3,323,863
Receivables
Trade, Net..................................... 23,744,311 23,744,311 23,472,714 23,472,714
Due From Seller................................ 474,011 474,011 - -
Other.......................................... 386,163 385,063 771,439 770,339
Current Portion of Program Broadcast Rights...... 4,427,832 4,427,832 2,433,489 2,433,489
Prepaid Expenses................................. 1,453,007 1,453,007 2,104,168 2,104,168
Deferred Income Taxes............................ 1,333,000 1,333,000 1,000,000 1,000,000
--------------- --------------- --------------- ---------------
Total Current Assets................. 39,908,907 39,908,907 33,104,573 33,104,573
--------------- --------------- --------------- ---------------
Property and Equipment.............................. 84,021,301 84,021,301 76,614,074 76,614,074
--------------- --------------- --------------- ---------------
Intangible Assets................................... 354,622,296 354,622,296 350,070,144 350,070,144
--------------- --------------- --------------- ---------------
Other Assets
Program Broadcast Rights, Less Current Portion... 2,298,365 2,298,365 1,598,800 1,598,800
Deferred Loan Costs.............................. 9,667,095 13,385,766 9,267,409 12,707,890
Land Held for Sale............................... 109,000 109,000 109,000 109,000
Other............................................ 670,605 670,605 678,314 678,314
--------------- --------------- --------------- ---------------
12,745,065 16,463,736 11,653,523 15,094,004
--------------- --------------- --------------- ---------------
$ 491,297,569 $ 495,016,240 $ 471,442,314 $ 474,882,795
=============== =============== =============== ===============
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
Current Liabilities
Current Maturities of Notes and Leases Payable... 14,015,273 $ 14,015,273 $ 14,614,991 $ 14,614,991
Current Maturities of Program Broadcast Rights
Payable........................................ 6,119,953 6,119,953 4,274,786 4,274,786
Accounts Payable and Accrued Expenses............ 15,368,581 15,368,581 13,690,114 13,690,114
Deferred Revenue................................. 707,347 707,347 662,788 662,788
--------------- --------------- --------------- ---------------
Total Current Liabilities............ 36,211,154 36,211,154 33,242,679 33,242,679
--------------- --------------- --------------- ---------------
Long-Term Obligations
Notes and Leases Payable (Note D)................ 247,171,289 344,219,003 242,237,124 345,655,219
Program Broadcast Rights Payable................. 1,592,400 1,592,400 964,655 964,655
Deferred Revenue................................. 4,435,166 4,435,165 4,108,963 4,108,963
Deferred Income Taxes............................ 57,415,000 54,600,000 53,665,000 48,089,000
--------------- --------------- --------------- ---------------
310,613,855 404,846,568 300,975,742 398,817,837
--------------- --------------- --------------- ---------------
Exchangeable Redeemable Senior Preferred Stock
(Note C)......................................... - 58,462,223 - 65,461,248
--------------- --------------- --------------- ---------------
Seller Junior Discount Preferred Stock (Note C)..... - 47,057,040 - 48,938,947
--------------- --------------- --------------- ---------------
Stockholder's Equity (Deficit)
Common Stock, No Par, Authorized 200 Shares,
Issued 179.09 Shares........................... 1,046,500 - 1,046,500 -
Common Stock, Class A $0.01 Par Value
25,000,000 Authorized None Issued or
Outstanding.................................... - - - -
Common Stock, Class B $0.01 Par Value
25,000,000 Authorized, 7,030,000 Issued and
Outstanding.................................... - 70,300 - 70,300
Additional Paid-In Capital....................... 149,592,627 (35,346,586) 149,309,922 (37,453,793)
Accumulated Deficit.............................. (4,685,418) (16,284,459) (11,651,380) (34,194,423)
--------------- --------------- --------------- ---------------
145,953,709 (51,560,745) 138,705,042 (71,577,916)
--------------- --------------- --------------- ---------------
Less 30.24 Shares Held in Treasury............... (1,481,149) - (1,481,149) -
--------------- --------------- --------------- ---------------
144,472,560 (51,560,745) 137,223,893 (71,577,916)
--------------- --------------- --------------- ---------------
$ 491,297,569 $ 495,016,240 $ 471,442,314 $ 474,882,795
=============== =============== =============== ===============
</TABLE>
-2-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------------------------
1996 1997
----------------------------------- -----------------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporation Corporation
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net revenues.................................. $ 18,432,157 $ 18,432,157 $ 33,115,170 $ 33,115,170
-------------- -------------- --------------- ---------------
Operating expenses:
Selling, technical and program expenses 8,003,457 8,003,457 14,940,419 14,940,419
General and administrative................. 2,683,156 2,683,156 4,705,774 4,705,774
Depreciation and amortization.............. 2,708,863 2,708,863 7,796,682 7,796,682
Corporate.................................. 591,542 591,542 1,125,430 1,125,430
-------------- -------------- --------------- ---------------
13,987,018 13,987,018 28,568,305 28,568,305
-------------- -------------- --------------- ---------------
OPERATING INCOME...................... 4,445,139 4,445,139 4,546,865 4,546,865
-------------- -------------- --------------- ---------------
Financial income (expense):
Interest expense:
Cash interest............................ (4,853,727) (4,853,727) (7,097,481) (7,097,481)
Other interest........................... (216,071) (998,052) (360,570) (3,966,878)
-------------- -------------- --------------- ---------------
(5,069,798) (5,851,779) (7,458,051) (11,064,359)
Interest income............................ 106,579 106,586 30,435 30,435
-------------- -------------- --------------- ---------------
(4,963,219) (5,745,193) (7,427,616) (11,033,924)
-------------- -------------- --------------- ---------------
(LOSS) BEFORE INCOME TAX BENEFIT...... (518,080) (1,300,054) (2,880,751) (6,487,059)
Income tax benefit............................ - - 640,875 2,083,874
-------------- -------------- --------------- ---------------
NET (LOSS)............................ $ (518,080) (1,300,054) $ (2,239,876) (4,403,185)
============== ==============
Preferred stock dividends and accretion....... (891,694) (4,504,916)
-------------- ---------------
Net income (loss) applicable to common stock.. $ (2,191,748) $ (8,908,101)
============== ==============
Earnings (loss) per common share........... ($0.31) ($1.27)
============== ==============
Weighted-average common shares outstanding.. 7,030,000 7,030,000
============== ==============
</TABLE>
-3-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------------------
1996 1997
----------------------------------- -----------------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporation Corporation
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net revenues.................................... $ 30,115,028 $ 30,115,028 $ 61,193,643 $ 61,193,643
--------------- --------------- --------------- ---------------
Operating expenses:
Selling, technical and program expenses...... 13,541,029 13,541,029 29,630,697 29,630,697
General and administrative................... 4,693,851 4,693,851 9,421,553 9,421,553
Depreciation and amortization................ 4,069,293 4,069,293 15,543,345 15,543,345
Corporate.................................... 1,087,434 1,087,434 1,821,748 1,821,748
--------------- --------------- --------------- ---------------
23,391,607 23,391,607 56,417,343 56,417,343
--------------- --------------- --------------- ---------------
OPERATING INCOME........................ 6,723,421 6,723,421 4,776,300 4,776,300
--------------- --------------- --------------- ---------------
Financial income (expense):
Interest expense:
Cash interest............................. (8,879,980) (8,879,980) (14,173,488) (14,173,488)
Other interest............................ (316,528) (1,098,513) (737,340) (7,574,381)
--------------- --------------- --------------- ---------------
(9,196,508) (9,978,493) (14,910,828) (21,747,869)
Interest income............................. 212,434 212,433 70,034 70,034
--------------- --------------- --------------- ---------------
(8,984,074) (9,766,060) (14,840,794) (21,677,835)
--------------- --------------- --------------- ---------------
(LOSS) BEFORE INCOME TAX BENEFIT....... (2,260,653) (3,042,639) (10,064,494) (16,901,535)
Income tax benefit............................. - - 3,098,532 5,859,531
--------------- --------------- --------------- ---------------
NET (LOSS)............................. $ (2,260,653) (3,042,639) $ (6,965,962) (11,042,004)
=============== ==============
Preferred stock dividends and accretion........ (891,694) (8,880,932)
--------------- ---------------
Net income (loss) applicable to common stock... $ (3,934,333) $ (19,922,936)
=============== ===============
Earnings (loss) per common share............ ($0.56) ($2.83)
=============== ===============
Weighted-average common shares outstanding.. 7,030,000 7,030,000
=============== ===============
</TABLE>
-4-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
BENEDEK BROADCASTING CORPORATION
--------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated Treasury
Stock Capital Deficit Stock Total
----------- -------------- --------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996............ $ 1,046,500 $ 149,592,627 $ (4,685,418) $ (1,481,149) $ 144,472,560
Financial costs related to debt and
preferred stock of Benedek
Communications Corporation........... - (282,705) - - (282,705)
Net (loss)........................... - - (6,965,962) - (6,965,962)
----------- -------------- --------------- ------------ --------------
Balance at June 30, 1997................ $ 1,046,500 $ 149,309,922 $ (11,651,380) $ (1,481,149) $ 137,223,893
=========== ============== =============== ============ ==============
</TABLE>
BENEDEK COMMUNICATIONS CORPORATION
----------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
----------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996.............. $ 70,300 $ (35,346,586) $ (16,284,459) $ (51,560,745)
Accretion to exchangeable redeemable
senior preferred stock............... - (2,012,972) - (2,012,972)
Financial costs related to the sale of
exchangeable redeemable senior
preferred stock...................... - (94,235) - (94,235)
Dividends payable on preferred stock - - (6,867,960) (6,867,960)
Net (loss)............................. - - (11,042,004) (11,042,004)
----------- -------------- -------------- --------------
Balance at June 30, 1997.................. $ 70,300 $ (37,453,793) $ (34,194,423) $ (71,577,916)
=========== ============== =============== ==============
</TABLE>
-5-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------------------
1996 1997
----------------------------------- -----------------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporation Corporation
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net (loss)........................................ $ (2,260,653) $ (3,042,639) $ (6,965,962) $ (11,042,004)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Amortization of program broadcast rights........ 1,302,515 1,302,515 3,041,768 3,041,768
Depreciation and amortization................... 2,701,736 2,701,736 10,631,921 10,631,921
Amortization of intangibles and deferred loan
costs........................................... 1,691,514 1,719,984 5,666,171 6,132,826
Amortization of note discount................... - 753,517 - 6,370,387
Loss on sale of property and equipment (7,428) (7,428) 8,114 8,114
Deferred income taxes........................... - - (3,417,000) (6,178,000)
Changes in operating assets and liabilities, net
of effects of acquisitions:
Receivables..................................... 2,631,367 2,631,367 (113,679) (113,679)
Due to sellers.................................. 863,371 863,371 97,337 97,337
Prepaid expenses and other...................... (233,827) (232,727) (657,898) (657,898)
Payments on program broadcast rights payable.... (1,185,741) (1,185,741) (2,820,793) (2,820,793)
Accounts payable and accrued expenses........... 2,316,000 2,316,000 (1,756,909) (1,756,909)
Deferred revenue................................ (261,810) (261,810) (370,762) (370,762)
-------------- --------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES...... 7,557,044 7,558,145 3,342,308 3,342,308
-------------- --------------- --------------- ---------------
Cash Flows From Investing Activities
Purchase of property and equipment................ (1,250,886) (1,250,886) (1,535,413) (1,535,413)
Proceeds from sale of equipment................... 10,300 10,300 10,011 10,011
Reimbursement for equipment purchases............. 79,198 79,198 - -
Purchase of securities............................ (651,535) (651,535) - -
Payment for acquisition of stations, net of cash.. (321,542,152) (321,542,152) - -
Payment of acquisition costs...................... (316,528) (316,528) - -
Other ............................................ (1,724) (1,729) (3,156) (3,156)
-------------- --------------- --------------- ---------------
NET CASH (USED IN) INVESTING ACTIVITIES........ (323,673,327) (323,673,332) (1,528,558) (1,528,558)
-------------- --------------- --------------- ---------------
Cash Flows From Financing Activities
Principal payments on notes and capital leases
payable......................................... (53,226) (53,226) (15,943,886) (15,943,886)
Proceeds from issuance of redeemable preferred
stock........................................... - 105,000,000 - -
Proceeds from long-term debt...................... 128,000,000 218,178,200 - -
Contribution of paid-in capital by parent 188,706,477 - - -
Proceeds from Revolving Credit Facility - - 9,982,671 9,982,671
Payment of debt and preferred stock acquisition
costs........................................... (4,514,923) (10,986,642) (620,355) (620,355)
-------------- --------------- --------------- ---------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES..................................... 312,138,328 312,138,332 (6,581,570) (6,581,570)
-------------- --------------- --------------- ---------------
(DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,977,955) (3,976,855) (4,767,820) (4,767,820)
Cash and cash equivalents:
Beginning......................................... 9,668,331 9,668,331 8,090,583 8,091,683
-------------- --------------- --------------- ---------------
Ending............................................ $ 5,690,376 $ 5,691,476 $ 3,322,763 $ 3,323,863
============== =============== =============== ===============
</TABLE>
(Continued)
-6-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------------------
1996 1997
----------------------------------- -----------------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporation Corporation
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Supplemental Disclosure of Cash Flow Information
Cash payments for interest...................... $ 8,049,422 $ 8,049,422 $ 14,031,721 $ 14,031,721
Cash payments for income taxes.................. - - 418,823 418,823
============== =============== =============== ===============
Supplemental Schedule of Noncash Investing and
Financing Activities
Acquisition of program broadcast right.......... $ 368,751 $ 368,751 $ 347,860 $ 347,860
Notes and capital leases payable incurred for
purchase of equipment........................... 44,100 44,100 1,626,770 1,626,770
Equipment acquired by barter transactions....... 38,719 38,719 80,638 80,638
Dividends accrued on redeemable preferred stock. - 891,694 - 6,867,964
Accretion to exchangeable redeemable senior
preferred stock................................. - - - 2,012,973
============== =============== =============== ===============
Acquisition of Stations:
Cash purchase price............................. $ 321,542,152 $ 321,542,152
============== ===============
Net working capital acquired, net of cash
$535,810..................................... $ 10,061,537 $ 10,061,537
Property and equipment acquired at fair market
value........................................ 72,533,059 72,533,059
Intangible assets acquired...................... 301,026,581 301,026,581
Deferred income taxes assumed................... (58,872,778) (58,872,778)
Other, net...................................... 19,112 19,112
============== ===============
324,767,511 324,767,511
Less: Application of deposit.................... (3,225,359) (3,225,359)
============== ===============
$ 321,542,152 $ 321,542,152
============== ===============
</TABLE>
-7-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE A) - NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS:
Benedek Communications Corporation ("Benedek Communications") is a holding
company that derives its operating income and cash flow from its wholly owned
subsidiary, Benedek Broadcasting Corporation ("Benedek Broadcasting") which owns
and operates 22 television stations (the "Stations") located throughout the
United States. The Stations operate under network affiliation contracts, which
provide programs to the affiliated Stations and the stations sell commercial
time during the programs to national, regional and local advertisers. The
networks also sell commercial time during the programs to national advertisers.
Credit arrangements are determined on an individual customer basis.
BASIS OF PRESENTATION:
The interim unaudited consolidated financial statements of Benedek
Communications include the accounts of Benedek Communications, Benedek
Broadcasting and Benedek License Corporation ("BLC"), a wholly owned subsidiary
of Benedek Broadcasting. The interim unaudited consolidated financial statements
of Benedek Broadcasting include the accounts of Benedek Broadcasting and BLC.
All significant intercompany items and transactions have been eliminated in the
interim unaudited consolidated financial statements. Benedek Broadcasting and
Benedek Communications had identical stock ownership, so the capitalization of
Benedek Communications by its sole stockholder with Benedek Broadcasting stock
was accounted for in a manner similar to a pooling-of-interests. The
consolidated financial statements of Benedek Communications include the
consolidated financial statements of Benedek Broadcasting for the period prior
to June 6, 1996 recast to reflect the difference in par value of Benedek
Communications' stock.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for the fair presentation of
the financial position as of June 30, 1997 and the results of operations for the
three months and the six months ended June 30, 1997 have been included.
Operating results for the three months and six month periods ended June 30, 1997
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the Annual
Reports on Form 10-K of each of Benedek Broadcasting and Benedek Communications
for the year ended December 31, 1996. Certain prior year amounts have been
reclassified to conform with the current year's presentation, with no effect on
net income or stockholder's equity.
(NOTE B) - ACQUISITIONS, RELATED PARTY AND BUSINESS COMBINATIONS
On April 10, 1996, the sole stockholder of Benedek Broadcasting formed
Benedek Communications as a holding company. At the closing of the acquisitions
described below, the stockholder contributed all of
-8-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
the outstanding shares of common stock of Benedek Broadcasting to Benedek
Communications in exchange for the issuance to him of all of the outstanding
shares of common stock of Benedek Communications.
On June 6, 1996, Benedek Broadcasting completed two acquisitions. These
acquisitions included (i) the assets of the television broadcasting division of
Stauffer Communications, Inc. consisting of five television stations (the
"Stauffer Stations") for a total purchase price of $54,500,000 and (ii) all the
issued and outstanding capital stock of Brissette Broadcasting Corporation which
owned and operated eight television stations for a purchase price of
$270,000,000.
These acquisitions have been accounted for under the purchase method of
accounting. Accordingly, the results of the operations for the acquired stations
are included in the consolidated financial statements since the date of
acquisition. The purchase price has been allocated to acquired assets and
liabilities based on their relative fair values as of the closing date. The
excess of the purchase price over the net assets received from the acquisitions
is being amortized on a straight-line method over a period of 40 years.
The pro forma results of operations for the three months and six months
ended June 30, 1996, assuming the acquisitions of the Stauffer Stations and
Brissette Broadcasting Corporation had taken place on January 1, 1996 as
compared to the actual results for the three months and six months ended June
30, 1997 are as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------------------------
1996 1997
----------------------------------- -----------------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporation Corporation
--------------- --------------- --------------- ---------------
(Pro forma) (Actual)
<S> <C> <C> <C> <C>
Net revenue................................. $ 32,274,927 $ 32,274,927 $ 33,115,170 $ 33,115,170
Operating expenses.......................... (26,489,376) (26,489,376) (28,568,305) (28,568,305)
Financial expenses.......................... (7,102,665) (12,080,762) (7,427,616) (11,033,924)
-------------- --------------- --------------- ---------------
(Loss) before income tax benefit......... (1,317,114) (6,295,211) (2,880,751) (6,487,059)
Income tax (expense) benefit................ (136,114) 1,855,078 640,875 2,083,876
-------------- --------------- --------------- ---------------
Net (loss) .............................. $ (1,453,228) (4,440,133) $ (2,239,876) (4,403,183)
============== ===============
Preferred stock dividends and accretion..... (4,210,796) (4,504,916)
=============== ===============
Net (loss) applicable to common stock.... $ (8,650,929) $ (8,908,099)
=============== ===============
(Loss) per common share.................. ($1.23) ($1.27)
=============== ===============
Weighted-average common shares outstanding.. 7,030,000 7,030,000
=============== ===============
</TABLE>
-9-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------------------
1996 1997
----------------------------------- -----------------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporation Corporation
--------------- --------------- --------------- ---------------
(Pro forma) (Actual)
<S> <C> <C> <C> <C>
Net revenue................................. $ 59,894,019 $ 59,894,019 $ 61,193,643 $ 61,193,643
Operating expenses.......................... (52,828,521) (52,828,521) (56,417,343) (56,417,343)
Financial expenses.......................... (14,291,969) (22,366,594) (14,840,794) (21,677,835)
-------------- --------------- --------------- ---------------
(Loss) before income tax benefit......... (7,226,471) (15,301,096) (10,064,494) (16,901,535)
Income tax benefit.......................... 1,797,582 5,027,432 3,098,532 5,859,531
-------------- --------------- --------------- ---------------
Net (loss) .............................. $ (5,428,889) (10,273,664) $ (6,965,962) (11,042,004)
============== ===============
Preferred stock dividends and accretion..... (8,352,844) (8,880,932)
--------------- ---------------
Net (loss) applicable to common stock....... $ (18,626,508) $ (19,922,936)
=============== ===============
(Loss) per common share.................. ($2.65) ($2.83)
=============== ===============
Weighted-average common shares outstanding.. 7,030,000 7,030,000
=============== ===============
</TABLE>
(NOTE C) - REDEEMABLE EQUITY SECURITIES AND DISCOUNT NOTES
Concurrent with the acquisitions described in (Note B), Benedek
Communications entered into the following financing transactions, the net
proceeds of which were contributed by Benedek Communications to Benedek
Broadcasting to finance the acquisitions.
(1) Benedek Communications sold 60,000 Units in a private placement, which
generated gross proceeds of $60,000,000. Each Unit consisted of (i) ten
shares of Exchangeable Redeemable Senior Preferred Stock, (ii) ten
Initial Warrants, and (iii) 14.8 Contingent Warrants.
(i) Senior Preferred Stock - Benedek Communications issued 600,000 shares
of 15% Exchangeable Redeemable Senior Preferred Stock due 2007 (the
"Senior Preferred Stock"), with an initial liquidation preference
equal to the gross proceeds received of $60,000,000. Of these
proceeds, $9,000,000 was allocated to the initial warrants described
in (ii) below. The Senior Preferred Stock is being accreted to its
initial liquidation preference of $60,000,000 using the effective
interest method commencing on June 5, 1996 and ending on July 1,
2000. Dividends are payable to holders of the outstanding shares at
the rate of 15% per annum of the then effective liquidation
preference per share, payable quarterly beginning July 1, 1996 and
accruing from June 5, 1996. Benedek Communications has the option to
pay dividends on any dividend payment date occurring on or before
July 1, 2001 either in cash or by adding such dividends to the then
effective liquidation preference. Benedek Communications also has the
option to immediately redeem these shares, in whole or in part, at
predetermined redemption prices. If redeemed prior to July 1, 2000,
the redemption price is 115% of the then effective liquidation
-10-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
preference. Since it is management's intention to redeem the Senior
Preferred Stock prior to such date, the amount of the redemption
premium payable at such time is being accreted as a constructive
distribution over the period commencing on June 5, 1996 and ending
July 1, 2000. Benedek Communications is required to redeem the
outstanding shares on July 1, 2007 at a redemption price equal to
100% of the then effective liquidation preference plus any accrued
and unpaid dividends to the date of redemption. The Senior Preferred
Stock is exchangeable into debentures at Benedek Communications'
option, subject to certain conditions, in whole on any scheduled
dividend payment due. The Senior Preferred Stock has been registered
with the Securities and Exchange Commission pursuant to a
registration statement declared effective in October 1996.
(ii) Initial Warrants - Benedek Communications issued 600,000 Initial
Warrants which expire on July 1, 2007. Each Initial Warrant entitles
the holder thereof to purchase one share of Class A Common Stock at
an exercise price of $0.01 per share. The value of the Initial
Warrants at the date of issuance was $9,000,000 which was allocated
to paid-in capital.
(iii) Contingent Warrants - Benedek Communications issued 888,000
Contingent Warrants, each warrant to acquire one share of Class A
Common Stock at an exercise price of $0.01 per share. The Contingent
Warrants were issued to an escrow agent and are not outstanding. The
Contingent Warrants are not separable from the Exchangeable
Redeemable Senior Preferred Stock and will not be delivered out of
escrow unless the Exchangeable Redeemable Senior Preferred Stock is
not redeemed on or prior to July 1, 2000. Since it is management's
intention to redeem the Exchangeable Redeemable Senior Preferred
Stock prior to any release of the Contingent Warrants from escrow, no
allocation of the proceeds was made to the Contingent Warrants.
(2) Junior Preferred Stock - Benedek Communications issued 450,000 shares of
Seller Junior Discount Preferred Stock due July 1, 2008 (the "Junior
Preferred Stock") with an aggregate liquidation preference equal to the
proceeds of $45,000,000. Dividends are payable to the holders of the
Junior Preferred Stock at 7.92% per annum until the fifth anniversary of
the issuance thereof and thereafter at increasing rates up to 18%. Since
Benedek Communications intends to redeem the Junior Preferred Stock prior
to the fifth anniversary, dividends are being accrued at the initial rate.
The dividends on the Junior Preferred Stock are cumulative from the date
of issuance. Until the fifth anniversary of the issuance thereof, dividend
payments on the Junior Preferred Stock may not be made in cash and instead
will be added automatically to the liquidation preference and as a result
will be deemed paid in full and will not accumulate. The Junior Preferred
Stock is subject to mandatory redemption in whole on July 1, 2008 and
Benedek Communications has the option to redeem these shares in whole or
in part at a price equal to the sum of the liquidation value per share
plus an amount equal to all accumulated and unpaid dividends per share to
the date of redemption.
-11-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(3) Discount Notes - Benedek Communications issued Senior Subordinated
Discount Notes due 2006 (the "Discount Notes") in the principal amount of
$170,000,000. The Discount Notes were issued at a discount of $79,821,800
which generated gross proceeds of $90,178,200. The Discount Notes mature
on May 15, 2006 and yield 13.25% per annum with no cash interest accruing
prior to May 15, 2001. Thereafter, cash interest will accrue until
maturity payable semiannually, commencing November 15, 2001. On or after
May 15, 2000, the Discount Notes are redeemable at the option of Benedek
Communications, in whole or in part, at predetermined redemption prices
and under specified conditions. The Discount Notes are subordinated to all
senior debt of Benedek Communications. The Discount Notes contain various
restrictive covenants, all of which Benedek Communications was in
compliance with at June 30, 1997. The Discount Notes have been registered
with the Securities and Exchange Commission pursuant to a registration
statement declared effective in October 1996.
The following table summarizes these activities as follows:
Exchangeable
Redeemable Seller 13 1/4%
Senior Junior Discount Senior
Preferred Preferred Subordinated
Stock Stock Discount Notes
-------------- -------------- --------------
Issuance of preferred stock.. $ 51,000,000 $ 45,000,000 $ -
Issuance of Discount Notes... - - 90,178,200
Accrued dividends............ 10,243,181 3,938,947 -
Accretion of discount........ 4,218,067 - -
Amortization of note discount - - 13,239,898
-------------- -------------- --------------
Balance at June 30, 1997..... $ 65,461,248 $ 48,938,947 $ 103,418,098
============== ============== ==============
Since Benedek Communications derives all of its operating income and cash
flow from Benedek Broadcasting, Benedek Communications' ability to pay its
obligations including (i) interest on and principal of the Discount Notes, (ii)
redemption of and cash dividends on the Senior Preferred Stock, and (iii)
redemption of and cash dividends on the Junior Preferred Stock, will be
dependent primarily upon receiving dividends and other payments or advances from
Benedek Broadcasting. Benedek Broadcasting is a separate and distinct legal
entity and has no obligation, contingent or otherwise, to pay any amounts to
Benedek Communications or to make funds available to Benedek Communications for
debt service or any other obligation.
(NOTE D) - NOTES PAYABLE AND AMENDMENT TO THE CREDIT AGREEMENT
(1) Term Loans and Revolver. As part of the financing transactions described
in (Note C), on June 6, 1996, Benedek Broadcasting entered into a Credit
Agreement which, as amended, includes two Term Loan Facilities consisting of (i)
a Series A Facility of $70,000,000 with interest payable at the bank's base rate
plus 2.75% or the Eurodollar rate plus 3.75% per annum (currently 10.13%) and
(ii) a Series B Facility of $58,000,000 with interest payable at the bank's base
rate plus 3.25% or the Eurodollar rate plus 4.25% per annum (currently 10.63%).
The current rates reflect the February 1997 amendment, as discussed below. The
-12-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Term Loan Facilities provide for quarterly principal payments until final
maturity (except during the twelve months ended June 30, 1997, during which
principal payments were made on a semiannual basis). The Series A Facility and
the Series B Facility mature on May 1, 2001 and November 1, 2002, respectively.
Benedek Broadcasting is required to make scheduled aggregate amortization
payments on the Series A and Series B Facilities, as follows: during the balance
of 1997, $5.5 million; during 1998, $12.75 million; during 1999, $15.25 million;
during 2002, $21.75 million; during 2001, $18.18 million; and during 2002, $42.9
million.
The Credit Agreement also includes a Revolving Credit Facility of
$10,000,000, which bears interest at the bank's base rate plus 2.75% or the
Eurodollar rate plus 3.75% per annum (currently 9.56%). There were $2,982,670 of
outstanding borrowings on the Revolving Credit Facility as of June 30, 1997. The
unused portion of the Revolving Credit Facility bears interest at 0.5% per
annum.
The various interest rates described above are subject to reductions at such
times as certain leverage ratio performance tests are met.
The Credit Agreement also requires that Benedek Broadcasting prepay the Term
Loan Facilities by an amount equal to 50% of excess cash flow, as defined in the
Credit Agreement, no later than 100 days after the end of the year. Benedek
Broadcasting made a principal payment of $5,683,000 on April 1, 1997, as a
result of this clause.
The Term Loan Facilities and the Revolving Credit Facility are guaranteed by
Benedek Communications and secured by certain of Benedek Broadcasting's present
and future property and assets. The Term Loan Facilities are also guaranteed by
BLC and are collateralized by all of the stock of BLC. The Senior Secured Notes
described below are also secured by certain of the collateral securing the Term
Loan Facilities.
The Term Loan Facilities contain various restrictive covenants and require
compliance with certain financial ratios and covenants. On February 28, 1997,
Benedek Broadcasting amended the Credit Agreement as it relates to certain
restrictive covenants and financial ratios through June 30, 1998. As part of
such amendment, Benedek Broadcasting agreed to increase the interest rate on the
Term Loan Facilities and Revolving Credit Facility by an additional 50 basis
points. Benedek Broadcasting also agreed to reduce the available Revolving
Credit Facility from $15,000,000 to $10,000,000. Benedek Broadcasting was in
compliance with the covenants as of June 30, 1997.
(2) Senior Secured Notes. During 1995, Benedek Broadcasting issued
$135,000,000 of 11 7/8% Senior Secured Notes due 2005 (the "Senior Secured
Notes"). The Senior Secured Notes bear interest at the rate of 11 7/8% payable
semiannually on March 1 and September 1 of each year and mature in March 2005.
The Senior Secured Notes may be redeemed by Benedek Broadcasting in whole or in
part after March 1, 2000 subject to certain prepayment premiums. The Senior
Secured Notes contain various restrictive covenants relating to limitations on
dividends, transactions with affiliates, further issuance of debt, and the sales
of assets, among others. Benedek Broadcasting was in compliance with these
covenants at June 30, 1997.
-13-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Senior Secured Notes are collateralized by all of the stock of BLC and
certain other collateral including network affiliation agreements of the
Stations and certain general intangibles, all of which is also collateral for
the Term Loan Facilities described above.
Notes payable consist of the following:
June 30, 1997
-------------
Senior Secured Notes................ $ 135,000,000
Term loan series A.................. 61,931,180
Term loan series B.................. 54,385,820
Revolving Credit Facility........... 2,982,671
Discount Notes...................... 103,418,098
Other............................... 2,552,441
-------------
360,270,210
Less current maturities............. 14,614,991
-------------
$ 345,655,219
=============
(NOTE E) - COMMITMENTS AND CONTINGENCIES
Benedek Broadcasting has entered into a financing agreement for the purchase
of digital camera equipment for news operations in the amount of $1,500,000. As
of June 30, 1997, $571,000 was outstanding under the agreement with the balance
expected to be disbursed over the remainder of 1997.
Benedek Broadcasting has begun construction on a new studio and office
building at KHQA-TV, Quincy, Illinois. Estimated construction costs of
approximately $1,700,000 are to be funded in part by a mortgage loan of
$1,225,000 entered into during June 1997. As of June 30, 1997, no amounts were
disbursed under this facility.
-14-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE F) - SUBSEQUENT EVENT
Benedek Broadcasting purchased the television broadcasting licenses and
certain equipment of two low-power television stations in Columbia and Jefferson
City, Missouri for a purchase price of $200,000. Onehalf of the purchase price
was paid at closing on August 7, 1997, with the remainder due in two
installments in 1998 and 1999.
-15-
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1996 1997
---- ----
(Unaudited)
<S> <C> <C>
Federal Communication Commission (FCC)
Licenses, at cost, less accumulated amortization of $2,322,404
and $3,917,829 for 1996 and 1997, respectively......................... $ 123,538,650 $ 121,943,225
Goodwill, less accumulated amortization of $432,060 and $880,920 for 1996
and 1997, respectively................................................... 34,804,740 34,355,880
--------------- ----------------
$ 158,343,390 $ 156,299,105
=============== ================
LIABILITIES AND STOCKHOLDER'S EQUITY
Deferred tax liability...................................................... $ 34,506,000 $ 33,655,000
--------------- ----------------
Stockholder's Equity:
Common stock, $0.01 par authorized 3,000 shares,
issued and outstanding 99 shares....................................... 1 1
Additional paid-in capital............................................... 125,861,055 125,861,055
Accumulated deficit...................................................... (2,023,666) (3,216,951)
--------------- ----------------
123,837,390 122,644,105
--------------- ----------------
$ 158,343,390 $ 156,299,105
=============== ================
</TABLE>
-16-
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------------- -----------------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating expense, amortization........... $ (292,419) $ $(1,017,942) $ (401,191) $ (2,044,285)
--------------- --------------- --------------- ---------------
(Loss) before income tax benefit....... (292,419) (1,017,942) (401,191) (2,044,285)
Income tax benefit ....................... - 319,000 - 851,000
--------------- --------------- --------------- ---------------
NET (LOSS)............................ $ (292,419) $ (698,942) $ (401,191) $ (1,193,285)
=============== =============== =============== ===============
</TABLE>
-17-
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
STATEMENT OF STOCKHOLDER'S EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 1 $ 125,861,055 $ (2,023,666) $ 123,837,390
Net (loss)..................... - - (1,193,285) (1,193,285)
--------------- --------------- -------------- --------------
Balance at June 30, 1997......... $ 1 $ 125,861,055 $ (3,216,951) $ 122,644,105
=============== =============== ============== ==============
</TABLE>
-18-
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------
1996 1997
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net (loss)................................................. $ (401,191) $ (1,193,285)
Adjustments to reconcile net (loss) to net cash provided by
operating activities:
Amortization .............................................. 401,191 2,044,285
Deferred income tax........................................ - (851,000)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES............ $ 0 $ 0
Cash:
Beginning.................................................. - -
------------ ------------
Ending..................................................... $ 0 $ 0
============ ============
</TABLE>
-19-
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE A) - NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS:
Benedek License Corporation ("BLC") is a wholly owned subsidiary of Benedek
Broadcasting Corporation ("Benedek Broadcasting"). BLC was formed on April 18,
1996 to own and hold the Federal Communications Commission ("FCC") licenses for
the 22 television stations owned by Benedek Broadcasting which are located
throughout the United States.
BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for the fair presentation of the
financial position as of June 30, 1997 and the results of operations for the
three months and the six months ended June 30 have been included. Operating
results for the three month and six month periods ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Annual Report on
Form 10-K of Benedek Broadcasting for the year ended December 31, 1996.
(NOTE B) - ACQUISITIONS
On June 6, 1996, Benedek Broadcasting acquired thirteen television stations
including their respective FCC licenses. These licenses and the related goodwill
and deferred tax liability were transferred on that day to BLC as contributed
capital based on the pro rata share of the allocated purchase price paid by
Benedek Broadcasting.
(NOTE C) - STOCKHOLDER'S EQUITY
Benedek Broadcasting has pledged 100% of the outstanding common stock of BLC
as collateral for the Senior Secured Notes and the Term Loan Facilities.
BLC has guaranteed the obligations of Benedek Broadcasting with respect to
the Senior Secured Notes and the Term Loan Facilities.
(NOTE D) - SUBSEQUENT EVENT
On August 7, 1997, Benedek Broadcasting purchased two low-power television
stations including their respective FCC licenses. The licenses will be
transferred to BLC as contributed capital as of the acquisition date.
-20-
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
This Quarterly Report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including changes in national and regional economies, competition in
the television business, pricing fluctuations in local and national advertising,
program ratings and changes in programming costs, among other factors.
Except as otherwise provided, the financial data set forth below is derived
from the historical financial statements of the Company prepared in accordance
with generally accepted accounting principles. Such historical financial data
includes the results of operations of five television stations acquired from
Stauffer Communications, Inc. (the "Stauffer Stations") and eight television
stations acquired from Brissette Broadcasting Corporation (the "Brissette
Stations," and together with the Stauffer Stations, the "Acquired Stations")
from the date of the acquisition thereof on June 6, 1996. As used herein, "Same
Station" data refers to the historical results of operations of all 22
television stations currently owned by the Company as if such stations were
owned by the Company throughout the periods indicated with pro forma adjustments
only for corporate expenses, depreciation and amortization and interest. Same
Station information does not purport to represent what the Company's results of
operations would have been if such transactions had been effected at the
beginning of such periods and does not purport to project results of operations
of the Company in any future period.
As used herein, "Adjusted EBITDA" is defined as operating income before
financial income as derived from the consolidated statements of operations plus
depreciation and amortization, amortization of program broadcast rights and
noncash compensation less payments for program broadcast rights. "Adjusted
EBITDA" as defined in Benedek Broadcasting's Credit Agreement excludes from the
foregoing definition certain noncash revenues used in determining operating
income. As used herein,"broadcast cash flow" is defined as Adjusted EBITDA plus
corporate expenses.The Company has included Adjusted EBITDA and broadcast cash
flow data because such data is used by certain investors to measure a company's
ability to service debt. Adjusted EBITDA is used to pay principal and interest
on long-term debt and to fund capital expenditures. Adjusted EBITDA and
broadcast cash flow do not purport to represent cash provided by operating
activities as reflected in the Company's Consolidated Financial Statements, is
not a measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
Unless the context otherwise requires, references to the "Company" refer to
both Benedek Communications and its wholly-owned operating subsidiary, Benedek
Broadcasting, and financial information with respect to the Company refers to
the consolidated financial information of Benedek Communications, which includes
Benedek Broadcasting and its wholly-owned subsidiary, Benedek License
Corporation.
The operating revenues of the Company are derived primarily from the sale of
advertising time and, to a lesser extent, from compensation paid by the networks
for broadcasting network programming and barter transactions for goods and
services. Revenue depends on the ability of the Company to provide popular
programming which attracts audiences in the demographic groups targeted by
advertisers, thereby allowing
-21-
<PAGE>
<PAGE>
the Company to sell advertising time at satisfactory rates. Revenue also depends
significantly on factors such as the national and local economy and the level of
local competition.
For the six months ended June 30, 1997, the Company reported net revenues
of $61.2 million compared to net revenues of $30.1 million for the six months
ended June 30, 1996. The increase in 1997 net revenues was due to the
acquisitions of the Acquired Stations which had net revenues of $29.9 million.
Benedek Communications had a net loss of $11.0 million for the six months ended
June 30, 1997 compared to a net loss of $3.0 million for the six months ended
June 30, 1996. Benedek Broadcasting had a net loss of $7.0 million for the six
months ended June 30, 1997 compared to a net loss of $2.3 million for the six
months ended June 30, 1996. The additional net loss of Benedek Communications
was due to interest expense on its debt, net of income taxes. The Company's
Adjusted EBITDA for the six months ended June 30, 1997 was $20.5 million as
compared to $10.9 million for the six months ended June 30, 1996. On a Same
Station basis, Adjusted EBITDA for the six months ended June 30, 1997 was $12.4
million as compared to $12.3 million for the six months ended June 30, 1996.
Local/regional advertising and national advertising constitute the largest
categories of the Company's operating revenues and represent approximately 86.3%
of gross revenues for the six months ended June 30, 1997 as compared to 86.5%
for the six months ended June 30, 1996. Approximately 55.3% of the gross
revenues of the Company in the six months ended June 30, 1997 was generated from
local and regional advertising, which is sold primarily by the Stations' sales
staff, and the remainder of the advertising revenues is comprised primarily of
national advertising, which is sold by national sales representatives retained
by the Company. The Company generally pays commissions to advertising agencies
on local, regional and national advertising and to national sales
representatives on national advertising. Net revenues reflect deductions from
gross revenues for commissions payable to advertising agencies and national
sales representatives.
The Company's primary operating expenses are employee compensation,
programming and depreciation and amortization. Changes in compensation expense
result primarily from adjustments to fixed salaries based on employee
performance and inflation and, to a lesser extent, from changes in sales
commissions paid based on levels of advertising revenues. Programming expense
consists primarily of amortization of program rights. The Company purchases
first run and off-network syndicated programming on an ongoing basis and has a
policy of closely matching payments for and amortization of program rights in
each period. Under its contract with the network, a network-affiliated station
receives approximately two-thirds of its required daily programming and a cash
payment per hour of network programming cleared in exchange for the commitment
to air the network schedules in substantially unaltered form with the network's
commercial content intact. Depreciation and amortization expense has increased
as assets purchased at fair market value in connection with the acquisitions of
the Acquired Stations began to depreciate. For the six months ended June 30,
1997, depreciation and amortization increased $11.4 million from $4.1 million to
$15.5 million due to the acquisition of the Acquired Stations. Barter expense
generally offsets barter revenue and reflects the fair market value of goods and
services received. The Company's operating expenses (excluding depreciation and
amortization) represent approximately 66.7% of net revenues for the six months
ended June 30, 1997 as compared to approximately 64.1% of net revenues for the
six months ended June 30, 1996.
-22-
<PAGE>
<PAGE>
The following table sets forth the computation of broadcast cash flow and
Adjusted EBITDA for the periods indicated. The table includes the results of
operations of the Acquired Stations only from the closing date of June 6, 1996.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------------- -----------------------------------
1996 1997 1996 1997
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Operating income................................ $ 4,445 $ 4,547 $ 6,723 $ 4,776
Add:
Amortization of program broadcast rights 706 1,483 1,303 3,042
Depreciation and amortization............... 2,709 7,796 4,069 15,543
Corporate expenses.......................... 591 1,126 1,087 1,822
Less:
Payment for program broadcast liabilities... (664) (1,399) (1,186) (2,821)
--------------- --------------- --------------- ---------------
Broadcast cash flow......................... 7,787 13,553 11,996 22,362
Corporate.................................. 591 1,126 1,087 1,822
--------------- --------------- --------------- ---------------
Adjusted EBITDA............................. $ 7,196 $ 12,427 $ 10,909 $ 20,540
=============== =============== =============== ===============
</TABLE>
-23-
<PAGE>
<PAGE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 1996
The following table provides both historical and Same Station information for
the three month periods ended June 30, 1996 and 1997. The Same Station
information gives effect to the acquisition of the Acquired Stations as if such
transactions were consummated on January 1, 1996.
<TABLE>
<CAPTION>
Historical Same Station
Three Months Ended June 30, Three Months Ended June 30,
-------------------------------------- -------------------------------------
% %
1996 1997 Change 1996 1997 Change
---- ---- ------ ---- ---- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues..................... $ 18,432 $ 33,115 79.6% $ 32,275 $ 33,115 2.6%
--------- ---------- ---------- ---------- ---------- --------
Operating expenses:
Selling, technical and
program expenses............. 8,003 14,940 86.6 14,153 14,940 5.6
General and administrative..... 2,683 4,706 75.4 4,847 4,706 (2.9)
Depreciation and amortization.. 2,709 7,797 187.8 6,561 7,797 18.8
Corporate...................... 592 1,125 90.0 928 1,125 21.2
--------- ---------- ---------- ---------- ---------- --------
13,987 28,568 104.2 26,489 28,568 7.8
--------- ---------- ---------- ---------- ---------- --------
OPERATING INCOME........... $ 4,445 $ 4,547 2.2% $ 5,786 $ 4,547 (21.4)%
========= ========== ========== ========== ========== ========
Broadcast cash flow.............. $ 7,787 $ 13,553 74.0% $ 13,248 $ 13,553 2.3%
Broadcast cash flow margin....... 42.2% 40.9% 41.0% 40.9%
Adjusted EBITDA.................. $ 7,196 $ 12,427 72.6% $ 12,320 $ 12,427 0.9%
Adjusted EBITDA margin........... 39.0% 37.5% 38.2% 37.5%
</TABLE>
Net revenues for the three months ended June 30, 1997 increased $14.7 million
or 79.6% to $33.1 million from $18.4 million for the three months ended June 30,
1996 primarily as a result of the June 6, 1996 addition of the Acquired Stations
which increased net revenue by $13.4 million. On a Same Station basis, net
revenues for the three months ended June 30, 1997 increased $0.8 million or 2.6%
to $33.1 million from $32.3 million for the three months ended June 30, 1996,
despite a $0.6 million decline in political advertising revenue. Gross revenues
on a Same Station basis excluding political advertising revenue increased $1.5
million or 4.2% from the three months ended June 30, 1996.
Operating expenses for the three months ended June 30, 1997 increased $14.6
million or 104.2% to $28.6 million from $14.0 million for the three months ended
June 30, 1996. The increase in operating expenses was attributable to the
addition of the Acquired Stations. On a Same Station basis, operating expenses
for the three months ended June 30, 1997 increased $2.1 million or 7.8% to $28.6
million from $26.5 million for the three months ended June 30, 1996 caused
primarily by increased depreciation and amortization expense and a 4.7% increase
in payroll-related costs.
Operating income for the three months ended June 30, 1997 increased $0.1
million or 2.2% to $4.5 million from $4.4 million for the three months ended
June 30, 1996.
Financial (expenses), net for Benedek Broadcasting for the three months ended
June 30, 1997 increased $2.5 million or 49.6% to $7.4 million from $4.9 million
in the three months ended June 30, 1996. For the three months ended June 30,
1997, Benedek Communications' financial expenses (net) increased $5.3 million or
92.0% to $11.0 million from $5.7 million for the three months ended June 30,
1996. The increases are due to the Company's higher debt level following the
completion of the financing of the purchase price
-24-
<PAGE>
<PAGE>
for the Acquired Stations. Benedek Communications has higher financial expenses
than Benedek Broadcasting due to the debt structure.
Income tax benefit for Benedek Broadcasting for the three months ended June
30, 1997 was $0.6 million compared to none for the three months ended June 30,
1996. For the three months ended June 30, 1997, Benedek Communications had a
$2.1 million income tax benefit compared to none for the six months ended June
30, 1996. Benedek Communications has a greater income tax benefit than Benedek
Broadcasting due to the net income tax effect on its higher financial expenses.
The tax effect of the excess of book depreciation over tax depreciation and a
current period net operating loss for tax purposes were the primary factors
resulting in the income tax benefit for the three months ended June 30, 1997.
For the three months ended June 30, 1996, the Company recognized no income tax
benefit due to its Subchapter S Corporation status.
Net loss for Benedek Broadcasting for the three months ended June 30, 1997
was $2.2 million as compared to a $0.5 million net loss for the three months
ended June 30, 1996. Benedek Communications had a net loss of $4.4 million for
the three months ended June 30, 1997 as compared to a net loss of $1.3 million
for the three months ended June 30, 1996.
Broadcast cash flow for the three months ended June 30, 1997 increased $5.8
million or 74.0% to $13.6 million from $7.8 million for the three months ended
June 30, 1996 primarily as a result of the acquisition of the Acquired Stations.
As a percentage of net revenues, broadcast cash flow margin decreased to 40.9%
for the three months ended June 30, 1997 from 42.2% for the three months ended
June 30, 1996. On a Same Station basis, broadcast cash flow for the three months
ended June 30, 1997 increased $0.3 million or 2.3% to $13.6 million from $13.3
million for the three months ended June 30, 1996. As a percentage of net
revenues, broadcast cash flow margin on a Same Station basis decreased to 40.9%
for the three months ended June 30, 1997 from 41.0% for the three months ended
June 30, 1996.
-25-
<PAGE>
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1996
The following table provides both historical and Same Station information for
the six month periods ended June 30, 1996 and 1997. The Same Station information
gives effect to the acquisition of the Acquired Stations as if such transactions
were consummated on January 1, 1996.
<TABLE>
<CAPTION>
Historical Same Station
Six Months Ended June 30, Six Months Ended June 30,
-------------------------------------- -------------------------------------
% %
1996 1997 Change 1996 1997 Change
---- ---- ------ ---- ---- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues..................... $ 30,115 $ 61,194 103.2% $ 59,894 $ 61,194 2.1%
--------- ---------- ---------- ---------- ---------- --------
Operating expenses:
Selling, technical and
program expenses............. 13,541 29,631 118.8 27,453 29,631 7.9
General and administrative..... 4,694 9,421 100.7 9,750 9,421 (3.3)
Depreciation and amortization.. 4,069 15,543 281.9 13,805 15,543 12.6
Corporate...................... 1,087 1,822 67.6 1,821 1,822 0.0
--------- ---------- ---------- ---------- ---------- --------
23,391 56,417 141.1 52,829 56,417 6.8
--------- ---------- ---------- ---------- ---------- --------
OPERATING INCOME........... $ 6,724 $ 4,777 (28.9)% $ 7,065 $ 4,777 (3.2)%
========= ========== ========== ========== ========== ========
Broadcast cash flow.............. $ 11,997 $ 22,362 86.3% $ 22,873 $ 22,362 (2.2)%
Broadcast cash flow margin....... 39.8% 36.5% 38.1% 36.5%
Adjusted EBITDA.................. $ 10,909 $ 20,541 88.2% $ 21,052 $ 20,540 (2.4)%
Adjusted EBITDA margin........... 36.2% 33.5% 35.1% 33.6%
</TABLE>
Net revenues for the six months ended June 30, 1997 increased $31.1 million
or 103.2% to $61.2 million from $30.1 million for the six months ended June 30,
1996 primarily as a result of the June 6, 1996 addition of the Acquired Stations
which increased net revenue by $29.9 million. On a Same Station basis, net
revenues for the six months ended June 30, 1997 increased $1.3 million or 2.1%
to $61.2 million from $59.9 million for the six months ended June 30, 1996,
despite a decline in political advertising revenue. Gross revenues on a Same
Station basis excluding political advertising revenue increased $2.5 million or
3.8% from the six months ended June 30, 1996.
Operating expenses for the six months ended June 30, 1997 increased $33.0
million or 141.1% to $56.4 million from $23.4 million for the six months ended
June 30, 1996. The increase in operating expenses was attributable to the
addition of the Acquired Stations. On a Same Station basis, operating expenses
for the six months ended June 30, 1997 increased $3.6 million or 6.8% to $56.4
million from $52.8 million for the six months ended June 30, 1996. The increase
in operating expenses was caused primarily by increased depreciation and
amortization expense and a 5.0% increase in payroll-related costs.
Operating income for the six months ended June 30, 1997 decreased $2.3
million or 3.2% to $4.8 million from $7.1 million for the six months ended June
30, 1996.
Financial (expenses), net for Benedek Broadcasting for the six months ended
June 30, 1997 increased $5.9 million or 65.1% to $14.8 million from $8.9 million
in the six months ended June 30, 1996. For the six months ended June 30, 1997,
Benedek Communications' financial expenses (net) increased $11.9 million or
121.9% to $21.7 million from $9.8 million for the six months ended June 30,
1996. The increases are due to the Company's higher debt level following the
completion of the financing of the purchase price for the
-26-
<PAGE>
<PAGE>
Acquired Stations. Benedek Communications has higher financial expenses than
Benedek Broadcasting due to the debt structure.
Income tax benefit for Benedek Broadcasting for the six months ended June 30,
1997 was $3.1 million compared to none for the six months ended June 30, 1996.
For the six months ended June 30, 1997, Benedek Communications had a $5.9
million income tax benefit compared to none for the six months ended June 30,
1996. Benedek Communications has a greater income tax benefit than Benedek
Broadcasting due to the net income tax affect on the difference in financial
expenses. The tax effect of the excess of book depreciation over tax
depreciation and a current period net operating loss for tax purposes were the
primary factors resulting in the income tax benefit for the three months ended
June 30, 1997. For the six months ended June 30, 1996, the Company recognized no
income tax benefit due to its Subchapter S Corporation status.
Net loss for Benedek Broadcasting for the six months ended June 30, 1997 was
$7.0 million as compared to a $2.6 million net loss for the six months ended
June 30, 1996. Benedek Communications had a net loss of $11.0 million for the
six months ended June 30, 1997 as compared to a net loss of $3.0 million for the
six months ended June 30, 1996.
Broadcast cash flow for the six months ended June 30, 1997 increased $10.4
million or 86.3% to $22.4 million from $12.0 million for the six months ended
June 30, 1996 primarily as a result of the addition of the Acquired Stations. As
a percentage of net revenues, broadcast cash flow margin decreased to 36.5% for
the six months ended June 30, 1997 from 39.8% for the six months ended June 30,
1996. On a Same Station basis, broadcast cash flow for the six months ended June
30, 1997 decreased $0.5 million or 2.2% to $22.4 million from $22.9 million for
the six months ended June 30, 1996. As a percentage of net revenues, broadcast
cash flow margin on a Same Station basis decreased to 36.5% for the six months
ended June 30, 1997 from 38.1% for the six months ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source liquidity for the
Company. Cash provided by operating activities was $3.3 million for the six
months ended June 30, 1997 as compared to $7.6 million for the six months ended
June 30, 1996. Cash flows from operating activities included cash payments of
interest expense which totaled $14.0 million for the six months ended June 30,
1997 as compared to $8.0 million for the six months ended June 30, 1996. The
increase in payments of interest expense of $6.0 million was due to the
Company's higher debt level following the acquisition of the Acquired Stations.
Cash flows from operating activities for the six months ended June 30, 1996
included a $2.5 million signing bonus from CBS in consideration of the 1995
contract with the Company.
Cash Flows from Investing Activities were $(1.5) million for the six months
ended June 30, 1997 compared to $(323.7) million for the six months ended June
30, 1996. For the six months ended June 30, 1996, cash flows from investing
activities included the purchase cost of $321.5 million associated with the
acquisitions of the Acquired Stations.
Cash Flows from Financing Activities were $(6.6) million for the six months
ended June 30, 1997 compared to $312.1 million for the six months ended June 30,
1996. For the six months ended June 30, 1997, cash flows from financing
activities included principal payments on notes and capital leases payable of
$15.9 million funded in part by aggregate draw downs on the Revolving Credit
Facility of $10.0 million.
-27-
<PAGE>
<PAGE>
On June 6, 1996, the Company implemented a financing plan in order to finance
the acquisitions of the Acquired Stations and to pay fees and expenses related
thereto. The financing plan consisted of (i) the offer and sale by Benedek
Communications of the Discount Notes which generated gross proceeds of $90.2
million, (ii) the sale by Benedek Communications of units consisting of Senior
Preferred Stock and warrants which generated gross proceeds of $60.0 million,
(iii) Benedek Broadcasting borrowing $128.0 million pursuant to the Term Loan
Facilities of the Credit Agreement and (iv) Benedek Communications issuing an
aggregate of $45.0 million initial liquidation preference of Junior Preferred
Stock to the sellers of the Brissette Stations. At June 30, 1997, Benedek
Broadcasting also has available to it a maximum of $10.0 million under the
revolving credit facility of the Credit Agreement (the "Revolving Credit
Facility") of which $7.0 million was unused at June 30, 1997. From time to time
throughout 1997, Benedek Broadcasting's cash needs has required the use of the
Revolving Credit Facility for general working capital purposes and to fund
capital expenditures. During the six months ended June 30, 1997, the highest
outstanding balance under the Revolving Credit Facility was $8.5 million.
Benedek Broadcasting did not meet certain financial ratios contained in the
Credit Agreement at September 30, and December 31, 1996, due to lower than
expected Adjusted EBITDA (as defined in the Credit Agreement). The lenders under
the Credit Agreement agreed to waive such noncompliance and have amended certain
financial ratio tests applicable to 1997 and the first half of 1998. The
amendment provides that for so long as the ratio of debt to Adjusted EBITDA (as
defined in the Credit Agreement) exceeds certain levels, the Term Loan
Facilities will bear interest at varying additional spreads from that originally
provided for in the Credit Agreement. The amendment further reduced the
Revolving Credit Facility from $15.0 million to $10.0 million and increased the
percentage of excess cash flow to be applied as prepayments of the Term Loan
Facilities from 50% to 75% until the Company's ratio of debt to Adjusted EBITDA
is at 6.75 or lower. The Company was in compliance with the revised financial
covenants at June 30, 1997.
RECENT DEVELOPMENTS
In September 1996, the Company announced that it had reached an agreement in
principle with The Warner Bros. Television Network to develop a local cable
affiliate called the "WeB" in each of the Company's 20 markets which rank above
100. The WeB is intended to be a 24 hour, seven day a week television channel
which will broadcast Warner Bros. Network prime time programming, WB children's
programming and syndicated programming of Warner Bros. and others. The WeB is
scheduled to begin service in by the fall of 1998 in most 100-plus markets. The
Company will be responsible for all local sales efforts for the new channels in
its markets. The Company does not anticipate a significant effect on operations
during 1997 nor does it anticipate that significant capital expenditures will be
required in connection with the development of its WeB affiliates.
During August 1997, Benedek Broadcasting purchased the television
broadcasting licenses and certain equipment of two low-power television stations
affiliated with the Fox Television Network for a purchase price of $0.2 million.
These stations are located in Columbia and Jefferson City, Missouri. One-half of
the purchase price was paid at closing with the remainder due in two
installments during 1998 and 1999. Benedek Broadcasting does not expect material
expenditures for the immediate capital needs of these operations.
-28-
<PAGE>
<PAGE>
SEASONALITY
Net revenues of the Company are generally highest during the fourth quarter
of the year, primarily due to increased expenditures by advertisers in
anticipation of holiday season consumer spending and an increase in viewership
during this period and, to a lesser extent, during the second quarter of each
year. Net revenues for the first quarter are generally the lowest of the year.
INCOME TAXES
Historically, Benedek Broadcasting had elected to be taxed as a Subchapter S
Corporation. Therefore, for the period January 1, 1996 through June 6, 1996,
income taxes were not reflected in the consolidated financial statements, but
the income, deductions, losses and credits were passed to Benedek Broadcasting's
sole stockholder. Concurrent with the completion of the financing for the
acquisitions of the Acquired Stations, Benedek Broadcasting's election to be
taxed as a Subchapter S Corporation was terminated and Benedek Broadcasting
became subject to federal and state income taxes. In conjunction with the
acquisition of the Brissette Stations, a deferred tax liability of $53.3 million
was recognized primarily associated with the variance between future tax
deductions allowed for depreciation and amortization of intangibles and the
amount of such depreciation and amortization that will be reflected for book
purposes.
For the six months ended June 30, 1997, Benedek Broadcasting had a tax
benefit of $3.1 million recognized consisting of a $3.2 million benefit related
to the net reduction of deferred income tax liabilities and $0.1 million of
taxes currently due. Benedek Communications had a tax benefit of $5.9 million
for the six months ended June 30, 1997 consisting of a $6.0 million benefit
related to the net reduction of deferred income tax liabilities and $0.1 million
of taxes currently due.
Under the provisions of the Internal Revenue Code, Benedek Broadcasting has
approximately $11.5 million of actual net operating loss carryforwards available
to offset future tax liabilities whereas Benedek Communications has
approximately $12.2 million available to it. These net operating loss
carryforwards expire between 2007 through 2011.
EMERGING ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("FASB 128"), which establishes standards for computing and presenting earnings
per share. FASB 128 replaces the presentation of primary and fully diluted
earnings per share with basic and diluted earnings per share, respectively.
Basic earnings per share are computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share are computed similarly to fully diluted
earnings per share. The standard is effective for financial statements for
periods ending after December 15, 1997, with earlier application not permitted.
No material effect is expected on earnings per share as a result of the adoption
of FASB 128.
Also in February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information About Capital Structure" ("FASB
129"), which codifies certain disclosure requirements with respect to capital
structure, most of which have been previously required for public entities under
other accounting pronouncements. The standard is effective for financial
statements for periods ending after December 15, 1997.
-29-
<PAGE>
<PAGE>
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("FASB 130"), which establishes standards
for reporting and display of comprehensive income and its components. The
disclosure requirements of FASB 129 and FASB 130 will be effective for the
Company's financial statements beginning with the annual report for 1997.
Management does not believe that the implementation of FASB 129 or FASB 130 will
have a material affect on its financial statements.
-30-
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In June 1997, an action was commenced in United States District Court in
the Southern District of New York against Benedek Broadcasting, along with NBC,
ABC, CBS, FOX, the National Association of Broadcasters and several other
broadcast companies, alleging violations of federal antitrust laws. The
plaintiff, PrimeTime 24 joint venture, is a provider of network programming to
satellite home viewers. The plaintiff alleges that Benedek Broadcasting and
other defendants illegally misused their market power to insulate themselves
from new competition. Benedek Broadcasting believes that the plaintiff's claim
against it are without merit. No material effect on the financial statements is
anticipated from this lawsuit.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a)(3) Exhibits.
3.1 -- Certificate of Incorporation of Benedek Broadcasting Corporation, as
amended, incorporated by reference to Exhibit 3.1 to Benedek Broadcasting
Corporation's Registration Statement on Form S-1, File No. 33-91412,
filed on April 20, 1995 (the "S-1 Registration Statement").
3.2 -- By-Laws of Benedek Broadcasting Corporation, as amended, incorporated
by reference to Exhibit 3.2 to the S-1 Registration Statement.
3.3 -- Certificate of Incorporation of Benedek License Corporation,
incorporated by reference to Exhibit 3.3 to the Benedek Broadcasting
Corporation's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996 (the "Second Quarter 1996 10-Q").
3.4 -- By-Laws of Benedek License Corporation, incorporated by reference to
Exhibit 3.4 to the Second Quarter 1996 10-Q. 3.5 -- Certificate of
Incorporation of Benedek Communications Corporation, as amended,
incorporated by reference to Exhibit 3.1 to Benedek Communications
Corporation's Registration Statement on Form S-4, File No. 333-09529,
filed on August 2, 1996 (the "S-4 Registration Statement").
3.6 -- By-Laws of Benedek Communications Corporation, incorporated by
reference to Exhibit 3.2 to the S-4 Registration Statement.
3.7 -- Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 15.0% Exchangeable
Redeemable Senior Preferred Stock Due 2007 of Benedek Communications
Corporation and Qualifications, Limitations and Restrictions thereof,
incorporated by reference to Exhibit 3.3 to the S-4 Registration
Statement.
3.8 -- Certificate of Designation, Preferences and Relative, Participating,
Optional and Other Special Rights of Series C Junior Discount Preferred
Stock of Benedek Communications Corporation and Qualifications,
Limitations and Restrictions thereof, incorporated by reference to
Exhibit 3.4 to the S-4 Registration Statement.
4.1 -- Indenture dated as of March 1, 1995 between Benedek Broadcasting
Corporation and The Bank of New York, relating to the 11-7/8% Senior
Secured Notes due 2005 of Benedek Broadcasting Corporation, incorporated
by reference to Exhibit 4.3 to the S-4 Registration Statement and Exhibit
4.1 to the S-1 Registration Statement.
4.2 -- Form of 11-7/8% Senior Secured Note due 2005 of Benedek Broadcasting
(included in Exhibit 4.3 hereof), incorporated by reference to Exhibit
4.4 to the S-4 Registration Statement and Exhibit 4.2 to the S-1
Registration Statement.
-31-
<PAGE>
<PAGE>
4.3 -- First Supplemental Indenture dated as of June 6, 1996 among the
Registrant, Benedek License Corporation and The Bank of New York,
incorporated by reference to Exhibit 4.3 to the Second Quarter 1996 10-Q.
4.4 -- Indenture dated as of May 15, 1996 between Benedek Communications
Corporation and United States Trust Company of New York, relating to the
13-1/4% Senior Subordinated Discount Notes due 2006, incorporated by
reference to Exhibit 4.1 to the S-4 Registration Statement.
4.5 -- Form of 13-1/4% Senior Subordinated Discount Note due 2006 (included
in Exhibit 4.1 hereof), incorporated by reference to Exhibit 4.2 to the
S-4 Registration Statement and Exhibit 4.1 to the S-1 Registration
Statement.
4.6 -- Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 15.0% Exchangeable
Redeemable Senior Preferred Stock due 2007 of Benedek Communications
Corporation and Qualifications, Limitations and Restrictions thereof
(filed as Exhibit 3.7 hereof).
4.7 -- Certificate of Designation, Preferences and Relative, Participating,
Optional and Other Special Rights of Series C Junior Discount Preferred
Stock of Benedek Communications Corporation and Qualifications,
Limitations and Restrictions thereof (filed as Exhibit 3.8 hereof).
4.8 -- Warrant Agreement dated as of June 5, 1996 between Benedek
Communications Corporation and IBJ Schroder Bank & Trust Company with
respect to Class A Common Stock of Benedek Communications Corporation,
incorporated by reference to Exhibit 4.7 to the S-4 Registration
Statement.
*27 -- Financial Data Schedule of Benedek Broadcasting Corporation pursuant
to Article 5 of Regulation S-X.
*27.1 -- Financial Data Schedule of Benedek Communications Corporation pursuant
to Article 5 of Regulation S-X.
- ---------------
*Filed herewith
(b) Reports on Form 8-K
None.
-32-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK BROADCASTING CORPORATION
(REGISTRANT)
By: /s/ RONALD L. LINDWALL
...............................................
Ronald L. Lindwall
Senior Vice President and Chief Financial Officer
(Authorized Officer and Principal Accounting Officer)
DATE: August 14, 1997
-33-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK COMMUNICATIONS CORPORATION
(REGISTRANT)
By: /s/ RONALD L. LINDWALL
...............................................
Ronald L. Lindwall
Senior Vice President and Chief Financial Officer
(Authorized Officer and Principal Accounting Officer)
DATE: August 14, 1997
-34-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK LICENSE CORPORATION
(SUBSIDIARY GUARANTOR REGISTRANT)
By: /s/ RONALD L. LINDWALL
...............................................
Ronald L. Lindwall
Senior Vice President and Chief Financial Officer
(Authorized Officer and Principal Accounting Officer)
DATE: August 14, 1997
-35-
<PAGE>
<PAGE>
EXHIBIT INDEX
LOCATION OF EXHIBITS
EXHIBIT IN SEQUENTIAL
NO. DESCRIPTION OF EXHIBITS NUMBERING SYSTEM
-- ----------------------- ----------------
3.1 Certificate of Incorporation of Benedek Broadcasting
Corporation, as amended, incorporated by reference
to Exhibit 3.1 to Benedek Broadcasting Corporation's
Registration Statement on Form S-1, File No.
33-91412, filed on April 20, 1995 (the "S-1
Registration Statement").
3.2 By-Laws of Benedek Broadcasting Corporation, as
amended, incorporated by reference to Exhibit 3.2 to
the S-1 Registration Statement.
3.3 Certificate of Incorporation of Benedek License
Corporation, incorporated by reference to Exhibit
3.3 to the Benedek Broadcasting Corporation's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 (the "Second Quarter 1996 10-Q").
3.4 By-Laws of Benedek License Corporation, incorporated
by reference to Exhibit 3.4 to the Second Quarter
1996 10-Q.
3.5 Certificate of Incorporation of Benedek
Communications Corporation, as amended, incorporated
by reference to Exhibit 3.1 to Benedek
Communications Corporation's Registration Statement
on Form S-4, File No. 333-09529, filed on August 2,
1996 (the "S-4 Registration Statement").
3.6 By-Laws of Benedek Communications Corporation,
incorporated by reference to Exhibit 3.2 to the S-4
Registration Statement.
3.7 Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional
and Other Special Rights of 15.0% Exchangeable
Redeemable Senior Preferred Stock Due 2007 of
Benedek Communications Corporation and
Qualifications, Limitations and Restrictions
thereof, incorporated by reference to Exhibit 3.3 to
the S-4 Registration Statement.
3.8 Certificate of Designation, Preferences and
Relative, Participating, Optional and Other Special
Rights of Series C Junior Discount Preferred Stock
of Benedek Communications Corporation and
Qualifications, Limitations and Restrictions
thereof, incorporated by reference to Exhibit 3.4 to
the S-4 Registration Statement.
-36-
<PAGE>
<PAGE>
LOCATION OF EXHIBITS
EXHIBIT IN SEQUENTIAL
NO. DESCRIPTION OF EXHIBITS NUMBERING SYSTEM
-- ----------------------- ----------------
4.1 Indenture dated as of March 1, 1995 between Benedek
Broadcasting Corporation and The Bank of New York,
relating to the 11-7/8% Senior Secured Notes due
2005 of Benedek Broadcasting Corporation,
incorporated by reference to Exhibit 4.3 to the S-4
Registration Statement and Exhibit 4.1 to the S-1
Registration Statement.
4.2 Form of 11-7/8% Senior Secured Note due 2005 of
Benedek Broadcasting (included in Exhibit 4.3
hereof), incorporated by reference to Exhibit 4.4 to
the S-4 Registration Statement and Exhibit 4.2 to
the S-1 Registration Statement.
4.3 First Supplemental Indenture dated as of June 6,
1996 among the Registrant, Benedek License
Corporation and The Bank of New York, incorporated
by reference to Exhibit 4.3 to the Second Quarter
1996 10-Q.
4.4 Indenture dated as of May 15, 1996 between Benedek
Communications Corporation and United States Trust
Company of New York, relating to the 13-1/4% Senior
Subordinated Discount Notes due 2006, incorporated
by reference to Exhibit 4.1 to the S-4 Registration
Statement.
4.5 Form of 13-1/4% Senior Subordinated Discount Note
due 2006 (included in Exhibit 4.1 hereof),
incorporated by reference to Exhibit 4.2 to the S-4
Registration Statement and Exhibit 4.1 to the S-1
Registration Statement.
4.6 Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional
and Other Special Rights of 15.0% Exchangeable
Redeemable Senior Preferred Stock due 2007 of
Benedek Communications Corporation and
Qualifications, Limitations and Restrictions thereof
(filed as Exhibit 3.7 hereof).
4.7 Certificate of Designation, Preferences and
Relative, Participating, Optional and Other Special
Rights of Series C Junior Discount Preferred Stock
of Benedek Communications Corporation and
Qualifications, Limitations and Restrictions thereof
(filed as Exhibit 3.8 hereof).
4.8 Warrant Agreement dated as of June 5, 1996 between
Benedek Communications Corporation and IBJ Schroder
Bank & Trust Company with respect to Class A Common
Stock of Benedek Communications Corporation,
incorporated by reference to Exhibit 4.7 to the S-4
Registration Statement.
-37-
<PAGE>
<PAGE>
LOCATION OF EXHIBITS
EXHIBIT IN SEQUENTIAL
NO. DESCRIPTION OF EXHIBITS NUMBERING SYSTEM
-- ----------------------- ----------------
*27 Financial Data Schedule of Benedek Broadcasting
Corporation pursuant to Article 5 of Regulation S-X.
*27.1 Financial Data Schedule of Benedek Communications
Corporation pursuant to Article 5 of Regulation S-X.
*Filed herewith
-38-
<PAGE>
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